Tajikistan has identified FDI as a critical component of its national development strategy, but the country faces challenges in attracting sufficient investment to non-extractive sectors. FDI can help Tajikistan achieve many of its economic goals, including job creation, diversification and private-sector development. Therefore, FDI attraction can be an important component of Tajikistan’s recovery and structural transformation. Yet despite statutory openness to investment in most sectors, Tajikistan has not yet fully realised its potential as an investment destination, and foreign investment is concentrated in extractive industries. It needs to attract more and more diverse FDI inflows in terms of both sources and destination sectors.
Investment promotion and facilitation actions carried out by a dedicated investment promotion agency (IPA) can help attract FDI when underpinned by other measures to improve the investment framework. As the pandemic is expected to increase competition for FDI and reduce investors’ appetite for risk globally, the role of IPAs is gaining importance around the world. Stronger investment promotion may be especially critical for Tajikistan, as many international investors still know relatively little about it, and they must therefore devote significant resources to gathering information about opportunities and challenges there. An effective IPA can reduce these costs through proactive outreach to potential investors. It can also help reduce the cost of doing business by helping investors navigate the country’s complex and often unpredictable legal environment.
This note provides analysis and recommendations to strengthen investment promotion in Tajikistan and support the attraction of more FDI, focusing on (1) promotional activities (2) the institutional framework for investment promotion, and (3) facilitation and policy advocacy functions.
First, activities. At present, investors can find it difficult to locate information about investment opportunities in Tajikistan. The country would benefit from clearer branding as an investment destination, through clear and consistent messaging by leveraging digital platforms. It would also be helpful to identify a limited number of sectors to target for investment – an important endeavour given limited resources. Tajikistan’s IPAs might also reduce their reliance on time-intensive but less effective methods, like generalised events. Some simple and potentially effective solutions, such as a well-designed website and database to track prospective investors, could enable the authorities to identify and contact them proactively.
Second, institutions. Currently, Tajikistan has one main government institution mandated with investment promotion. The State Committee on Investment and State Property Management is the authorised body to promote and develop investment. The State Unitary Enterprise “Tajinvest”, which operates under the Committee’s umbrella, fulfils a number of key functions. In addition, other line ministries have departments involved in investment promotion and facilitation in their relevant sectors. Some investors report finding it hard to understand the distinctions between their mandates and activities, which can contribute to confusion and inefficiency. Streamlining and clarifying for investors and other external actors the roles of these institutions would help them realise their investment-promotion mandates. Tajikistan at this point also lacks the development of an overarching investment strategy with specific goals and methods for investment promotion. Such a strategy is needed to guide, co-ordinate and focus the work of all these actors.
Third, policy advocacy and facilitation. Prospective and current investors report that they can face significant procedural and legal hurdles in their investment journey. While Tajikistan’s IPA devotes significant resources to providing assistance with these issues, investors note that this support can be limited. The State Committee is actively engaged in generalised aftercare and they emphasise their readiness to help resolve individual problems, but investors report being uncertain about when and how to rely on them in respect of specific disputes (taxation, inspections, permits, etc.). Maintaining good relationships with existing investors by offering logistical facilitation and aftercare services could help change this. This includes liaising with investors to advocate on their behalf in order to assess and smoothen bottlenecks in the investment climate.
It is critical that Tajikistan continues to advance reforms to improve the overall investment environment in tandem with steps to strengthen investment promotion. In recent years, the authorities have simplified regulation in many spheres, introduced measures to reduce administrative burdens on businesses and substantially overhauled the tax code. These are welcome steps and it is critical that they continue even as the country strengthens its promotion institutions and strategies.